What is Agency?

Agency means a relationship in which the real estate licensee acts for or represents a person as an agent by that person’s express authority in a commercial or residential real estate transaction, unless a different legal relationship is intended and is agreed to as part of the brokerage agreement.

Does my brokerage agreement need to be in writing?

Yes. Under Section 54.1-2137 of the Virginia Code, Brokerage Agreements must be in writing. Article 9 of the Code of Ethics speaks to this as well.

REALTORS®, for the protection of all parties, shall assure whenever possible that all agreements related to real estate transactions including, but not limited to, listing and representation agreements, purchase contracts, and leases are in writing in clear and understandable language expressing the specific terms, conditions, obligations and commitments of the parties. A copy of each agreement shall be furnished to each party to such agreements upon their signing or initialing. (Amended 1/04)

A written brokerage agreement must have:

  • A definite termination date (or it will default to 90 days)
  • The amount of the brokerage fee and how and when the fees are to be paid
  • The services to be rendered by the licensee
  • Any other terms agreed to by the client and licensee

Visit Virginia REALTORS® website to browse the Standard Forms and Contracts available for download.

What do I do if the buyer wants to be represented by my firm but refuses to sign a Buyer Brokerage Agreement?

The law states that all Buyer Brokerage Agreements must be in writing, so if the buyer wants to be represented by an agent, she will have to eventually sign a Buyer Brokerage Agreement. However, the law does not specify the duration of the agreements. For example, let’s say a buyer is looking for a house and wants representation, but isn’t sure from whom. Does he want to sign a Buyer Brokerage Agreement, which ties him to a specific agent for 180 days? Maybe not. However, he may be very willing to sign an agreement for a few days or for a specific property while he meets some different agents. If after a trial period both the agent and the buyer decide that the relationship will be a good one then the agent may want to propose a longer term Buyer Brokerage Agreement.

An unrepresented prospective buyer sees a For Sale sign and calls me to show him the property. Am I required to have a written Buyer Brokerage Agreement?

No, under the law a written Buyer Brokerage Agreement is not necessary to show property. The VREB issued a letter in June 2016 to clarify this issue. An agent does not need a Buyer Brokerage Agreement to take prospective buyers/tenants to a property, walk them through the property, or answer questions or give information that is already in the public record or in the listing description. In other words, the agent cannot provide her opinion, discretion, or judgment as a licensee. Once she crosses over into the realm of providing her professional opinion and judgment, a written Buyer Brokerage Agreement should be obtained.

Written brokerage agreements establish a clear understanding, for both the agent and the client, of everyone’s obligations in the relationship. Article 9 of the Code of Ethics states:

REALTORS®, for the protection of all parties, shall assure whenever possible that all agreements related to real estate transactions including, but not limited to, listing and representation agreements, purchase contracts, and leases are in writing in clear and understandable language expressing the specific terms, conditions, obligations and commitments of the parties. A copy of each agreement shall be furnished to each party to such agreements upon their signing or initialing. (Amended 1/04)

Brokerage agreements can also be signed for any length of time, meaning one could be signed for a day, an hour, or even one house. For all of these reasons, Virginia REALTORS® still encourages licensees to obtain a written buyer brokerage agreement prior to showing property.

What Agency forms are available for me to use with my clients?

Virginia REALTORS®, in collaboration with forms providers from around the state, has created forms to help agents comply with Virginia agency law. These forms are concise and user-friendly and are the product of an effort to reduce the number of new agency disclosure forms. All of the major forms providers had input in their creation and you are likely to see similar disclosure forms throughout the state.

The forms are available for download here.

Why doesn't Virginia REALTORS® create a shorter, simpler Buyer Brokerage agreement? The one page is great, but can't it be further shortened?

While a shorter form can be created that is still in compliance with Virginia law, at this time Virginia REALTORS® does not believe that it is in an agent’s best risk management interest to use such a form. A short, simple form is easiest to use, but certain protections – such as an agent’s commission for a purchase made by the buyer after expiration of the agreement – simply have to be included.

What is the difference between a client and a customer?

A client is someone with whom the agent has entered into a brokerage relationship — that means the agent has agreed to procure a seller, buyer, tenant, or landlord ready, able, and willing to sell, buy, option, exchange, or rent real estate on behalf of a client. Once the agent and client have agreed, they must sign a brokerage agreement designating the licensee as the person’s agent or representative.

A customer is someone who is not represented by his or her own agent and for whom a licensed agent can only perform ministerial acts. The agent cannot give advice to a customer about the property or the transaction. If the agent already represents a client in the transaction, the agent has a legal obligation to represent the interests of the existing client only and to disclose that brokerage relationship to the customer.

What if I represent a seller and an interested buyer wants me to write the offer but does not want representation? Do I have to sign a Buyer Broker Agreement with him?

No. The law does not force buyers to be represented by an agent. If assistance to the buyer is limited to ministerial tasks, such as filling in the blanks on a contract, no agreement is required. The agent does, however, still need to properly disclose the existing brokerage relationship with the seller in a residential real estate transaction. This can be done on Virginia REALTORS® Form 100 – Disclosure of Brokerage Relationship for Unrepresented Party(ies). If the Buyer decides he does, in fact, want to be represented by an agent, then a Buyer Brokerage Agreement must be signed. If the buyer decides he wants the agent who represents the seller to represent him as well, then a dual agency disclosure must be made to both the buyer and the seller, and all parties must agree to such representation in writing.

Always check with the broker to determine if the firm allows dual or designated agency.

How do teams disclose a brokerage relationship?

While the legislature has not addressed the use of “teams” in real estate transactions, it is recommended that the names of all licensed members of a team be included in the Disclosure of Brokerage Relationship to Unrepresented Parties. Further, for dual or designated agency representation, it is recommended that the agent’s name who is specifically assigned to the client should be inserted on the disclosure form.

Do I need to enter into a written brokerage agreement to provide a BPO?

No, but all payments for BPOs performed must go through the firm and are subject to the split with the firm. Some brokers may directly pass the BPO fee to the agent, but it is up to the firm.

Do commercial licensees have to disclose brokerage relationships?

No. Under Virginia law, effective July 1, 2016, commercial agents do not need to provide a disclosure of brokerage relationship to unrepresented parties.Commercial agents do, however, still have to disclose dual agency, and get the written consent of all parties to the transaction.

When do I need to disclose a brokerage relationship to an unrepresented party?

The law states that a licensee must disclose any brokerage relationship that she has with a party to the transaction as soon as she has a substantive discussion about a specific property or properties with an actual or prospective buyer, seller, landlord, or tenant who is not her client and who is not represented by another licensee. Two common categories of substantive discussions include conversations about:

  • Pricing – If an unrepresented purchaser at a property showing asks if the seller is willing to reduce the sale price; and
  • Repairs – If an unrepresented purchaser asks if the seller is willing to agree to paint the property as part of the contract.
Do I have to give the “Disclosure of Brokerage Relationship to Unrepresented Party(ies)” form to the other side in all residential transactions?

No, if both sides in the residential transaction are represented then the Disclosure of Brokerage Relationship to Unrepresented Party(ies) does not have to be given. For example, if Agent A conducts an open house and a prospective buyer asks a substantive question, but is represented by Agent B, then no brokerage disclosure needs to be given. Agent A should be cautious in this situation, however, and remind the prospective buyer that she represents the seller before answering any substantive questions.

If a commercial firm represents both parties in a transaction does a dual agency disclosure have to be signed by both parties?

Yes, this is existing law. This disclosure can be done using Virginia REALTORS® Form 102.

An agent has decided to leave Firm A for Company B. Does he have the right to contact Firm A’s clients directly before the agent notifies Firm A that he is leaving, in an effort to induce the clients to come with him?

While an agent at Firm A, he owes a fiduciary duty to that firm to act in its best interest. It is improper for the agent to solicit Firm A’s clients for Company B while still engaged by Firm A. A prohibition against such action should be written into brokerage office policies and independent contractor agreements. Firms can add teeth to the prohibition with a provision that says if an agent solicits the existing clients of the firm while still engaged, he will forfeit all commissions due from such clients’ transactions. A good company policy is the key.

Please keep in mind that soliciting Firm A’s clients for another firm while licensed with Firm A may result in a Code of Ethics violation. Standard of Practice 16-20 states:

REALTORS®, prior to or after their relationship with their current firm is terminated, shall not induce clients of their current firm to cancel exclusive contractual agreements between the client and that firm. This does not preclude REALTORS® (principals) from establishing agreements with their associated licensees governing assignability of exclusive agreements.

Listing agent Joe is leaving Firm A and going to Company B, and the sellers want to transfer their listing from Firm A to Company B. Can they do that?

Firm A owns the listing and is not obligated to release the sellers simply because Joe is leaving. Sellers may request that Firm A release them from the listing, but the firm is not obligated to do so unless the listing agreement itself specifies that the sellers will have the right to terminate the listing if Joe leaves the firm. Even if Firm A agrees to release the sellers from the listing, Company B would have to agree to enter into a listing. The listing can’t just be “transferred” from A to B without all parties’ consent, including the sellers (who might want to leave Firm A now that Joe is gone, but don’t want to list with Company B for whatever reason).

Even if Firm A doesn’t agree to release the sellers from their listing, the sellers may unilaterally remove the firm’s power of agency and right of sale and demand that the firm remove the property from the MLS. In other words, if the sellers say, “Joe’s gone, please remove our listing from the MLS,” Firm A must comply. However, this action would, in all likelihood, be a breach of their agreement with Firm A, possibly entitling the firm to damages as set out in the listing agreement or at law.

An agent in my office is selling his own home through the firm and has heard that he doesn’t have to use the Owner/Agent sign - are Owner/Agent signs still required?

Owner/Agents must disclose in all advertising that the owner is a real estate licensee if the licensee owns or has any ownership interest in the property advertised, even if the property is listed with a licensed firm. This requirement includes For Sale and For Rent signs, which may require a sign rider.

Also, please remember that in all cases, the Owner/Agent must also disclose to all parties, in writing, his interest, or potential interest, in a real estate transaction.